Find common ground for a successful leadership transition

March 13, 2017|Katherine Diederich

The manufacturing world is full of change, and preparing for any transition is a complicated process. For a leadership transition to be successful, everyone needs to be on the same page—and this is especially relevant in a family-owned business.

Transitions in a business environment impact several key areas. Operationally, transitions involve identifying and developing new leaders who can transition into leadership roles when existing leaders chose to leave or retire, or no longer possess the skillset to be successful. In a family-owned business, ownership/leadership transitions can be complex. Sometimes, the future leaders of the business may not possess the right skillsets. Navigating through these scenarios can be extremely difficult.

So what should a family business owner do? Start the dialogue. Share the goals for your family, the business and the related responsibilities. Document the information you learn and identify who in your family is interested in ownership or leadership of the business. A common family business dilemma is when some family members work in the family business while others do not, and parents are concerned about the legacy of their business while preserving financial equality for all their children. The key to addressing the uncertainty is to formalize each of the three key areas of the business: ownership, management and family →

In situations where all the family members from the next generation are on the same page with work and ownership, the financial element of transition can be accomplished with gifting or sale/purchase type transactions.

In complex ownership transition situations in which some family are involved in the business and others are not, the use of voting and nonvoting stock held by other legal entities, restricted trusts or life insurance proceeds can be used to transfer ownership, reward employment and maintain financial equality.

Once the type of involvement that family members want is known and communicated, working through the structure for transition and financial equality becomes more readily achievable. Coming to agreement here requires ongoing open communication among family, owners and managers →

During a business transition, in order to maintain long-term customer and vendor relationships, you need to identify needs, communicate those needs and implement solutions to satisfy those needs. The same process applies to the transition of your family business.

At Schenck, we have assisted many manufacturing and distribution companies with transition options. For assistance, talk with our succession planning team or any Manufacturing & Distribution team member.


Katherine Diederich, CPA, shareholder, specializes in providing auditing, business reporting and tax planning services to manufacturers and service corporations. Her responsibilities include quality control for compliance with auditing standards as well as providing the bridge between audit findings and useful recommendations for consideration by management.